South Africa should leverage the positive impact of the World Cup to improve living standards by boosting job creation and exports, said OECD Secretary-General Angel Gurría at the launch of the OECD Economic Survey of South Africa in Pretoria.
On the economic outlook for South Africa, he said that “by next year, annual growth could move above trend, which we estimate to be around 4%. But the economy is still around 3 per cent below potential, and will probably take at least three years to reach potential. The key short-term task is therefore to consolidate the emergence from recession.”
“The low employment rate is South Africa’s most salient economic problem,” he said. Improved co-ordination with social partners on wage bargaining would help, as well as weakening the legal extension of sectoral bargains, he advised.
“Youth-specific measures should be part of an employment strategy,” he said. “A broadened wage-subsidy programme, possibly building on the existing learnerships programme, could help.” Other measures could include expanding job-search assistance for young people, putting in place different sectoral minimum wages by age and extended probation periods for employees below a given age.
To boost exports, Mr Gurría emphasised the importance of tightening fiscal policy and improving product market regulation. “Fiscal policy can be tightened over the cycle and made more countercyclical, to help offset private capital inflow surges that accompany commodity price booms; foreign exchange intervention can be used more actively, as long as this is consistent with keeping inflation within the target band; and remaining controls on capital outflows can be removed,” he said.
Improving product market regulation would also boost growth. “Less restrictive regulation particularly regarding barriers to entrepreneurship, could boost growth by increasing competition, which in turn stimulates firms’ performance in innovation, capital-deepening, and corporate management,” he added.
Source: Organization for Economic Co-operation and Development (OECD)
